Sunday, February 28, 2010

Free Traitors

I am all for free trade between nations. But what is now being called “free trade” really isn’t honest free trade. It’s a false name. That’s one reason why I am against it. The other reason I am against it is that it is helping to destroy the middle class in this nation while enriching a few at the top who don’t mind making money off of people who are virtually slaves.

Indeed, the “free trade” advocates of today have a philosophy that fits right in with the plantation owners of the 1840’s. Were they a foreign country in our times the “free traders” would no doubt decide, “If they can get the cotton cheaper, then let’s do business.” The world’s largest plantation today is Communist China.

You can’t have honest free trade with an un-free nation. They can’t hold up their end. Think about what “free trade” is and you will see what I mean. A free market is one in which people have free choices to engage or not engage in an economic activity. It is also one in which people have a free flow of information so that they can make those choices rationally, and not from ignorance.

So how does that happen with a nation whose government will not let the common citizen leave the country of their own accord? That’s a captive labor market, not a free one. How does one have free trade with a nation whose media is state controlled and communications are censored? If the factory down the road is poisoning its workers and polluting your village, will the media tell you about it, or will they stay silent because of bribes or because the government is “partners” in the business? How can a worker decide, “I will not work at that factory unless they pay me more because of the poor safety record it has” if no such information is available?

People in Communist China cannot make free choices about whether or not to seek a better life elsewhere, nor can they make informed decisions about their choice of work within China. Therefore, while they have rip-roaring capitalism in China, China is not a free market. It’s the world’s largest concentration camp. It is the equivalent of a plantation owner claiming a free market because of the way he sells his cotton and buys and sells his slaves. It’s a free market for him, but not his workforce.

In an honest free market the costs of a good or service are born by those who benefit from the good or service and not transmitted to others. A thief selling hot stereo equipment to a fence represents a free market transaction, but not an honest free market transaction, because costs are born by the original owner of the stereo even though he does not get benefit from the exchange.

Another example of profiting at the expense of others: factories in China dump pollutants into the ocean, and into rivers. They shift the costs of their mess unto the rest of their country, while keeping the profits. Cost-shifting is a sophisticated form of theft. In the store where I work, all of the cloth sofas are made in the USA, almost all of the leather ones are from China. Why? Because we can compete on a level playing field, but processing leather is messy and there are a lot of chemicals involved. Here, we make factories clean up their mess. In China, they can just cost-shift it. “Free trade”, as the global corporate media is defining it, is making slaves of us all.

10 Comments:

Please understand that though I am calling for tariffs, the reason and way in which I wish them deployed are very different from the usual arguments. I am not trying to "save jobs" when those workers can't compete or won't accept wages which match their productivity. I only want them used in response to dishonest practices which deform a true free market.

For example, China will not let its currency float. Its currency is not allowed by its government to go up or down compared to the dollar based on free-market forces. It engages in deliberate currency manipulation such that its currency is an estimated 35% undervalued relative to the dollar. That alone means that our exports to them are 35% higher than they otherwise would be and their imports to us 35% higher.

Is that really a "free-market" transaction? Is that a level playing field? It actually has the same effect as a 35% tariff on the Chinese people of goods imported from the US. And bear in mind the average Chinese citizen had NO POLITICAL INPUT on whether or not they wanted to be denied access to US goods at a competitive price. The decision was made for them by their political masters.

So US goods are more expensive, to them, their exports are cheaper for us. You can't have "free trade" when the currency for their half of the transaction is NOT FREELY TRADED.

This is a distortion in the free market. It is the same as a tariff, yet those who are making money off the current system act like we are troglydites for suggesting that tariffs targeting that nation are an appropriate response. The economics of pegging one's currency to a specific foreign currency and deliberately undervaluing it (as the Chinese are doing with us) are exactly the same as a tariff on the goods of that one country.

Now there are two counter-arguments to the points I have made. One is as follows...."Let China produce things more cheaply. Let them do it in an "unfair" way. They only hurt themselves in the process, and in the meantime we reap the benefits. Yes, some of our jobs will be lost, but more jobs for us will be created, and our cost of living reduced and standard of living increased"

This practice of unilaterally disarmament in the face of protectionist measures has greatly enriched international corporations who have out-sourced their production while underselling truly domestic competition at home.

The alleged gift to the American consumer of "lower prices" has proven to me more of a loan than a gift. The money "saved" from lower prices was (in the aggregate) simply borrowed from future economic activity.

Our American experience shows this to be true as the "giant sucking sound" Ross Perot warned about in 1990 grows louder. We have tried unilateral disarmament in trade. We have tried reducing barriers through managed trade (not free trade though they call it such). It is time for armchair advocate to face the fact that their theories are incomplete. They do not accurately describe outcomes in a modern integrated economy.

Suppose for example that Detroit accepted a deal to get cars for 33% less than everyone else has to pay in exchange for their auto factories re-locating overseas over a period of 15 years. At first, the city experiences a bonanza. But once the factories start closing, a new pattern emerges. One can only hope that residents invested their savings from lower prices well (perhaps buying stock in the new factories overseas). Those low prices came with a terrible cost. Eventually the domestic economy is gone.

When one gets a foreign car for $14,000 while those who buy one made here must pay $20,000, it is a great deal for the buyer. But the bottom line is that your nation's economy had $6,000 worth of savings injected into it but at a cost of losing $20,000 of spending. Your economy had the $14,000 siphoned off and injected into another economy. Years go by and you wonder why business is so slow where you work. Its an accumulation of "savings" that are in reality a loan from future economic activity in your nation. The loans are coming due.

Again, I am not arguing for tariffs simply because the American worker can't compete without them, I am arguing for tariffs only when they will help make transactions more closely resemble what they would under actual free market conditions.

If a country pegs its currency so that it is 30% undervalued relative to hours, put a 30% tariff on their imports until they let their currency float. That tariff would not distort the free market so much as correct a distortion.

1) Their labor force is not free to leave the country to follow other opportunities. In other words, its a big version of a plantation. Those who profit from the system are profiting from captive labor, even if the cage is large.

2) They lack an independent media which facilitates the free flow of information. Under such conditions, there is no way their labor force, or even small investors, could make informed decisions about what offers they should accept or reject in the marketplace. They could be conned into handling toxins for low wages. The company then out-competes US companies because our workers know the score and insist on a combination of more protections and higher wages to take such work.

3) They lack political freedom with which to seek protection from the use of coercion in economic activity.

3a) Significant cost-shifting in the form no redress against polluters.

One other argument people use is a radical libertarian concept. That is, "if I choose to buy from those countries you are stealing from me by imposing a tariff on the transaction. You are taking my property without my consent."

While such an argument may apply to tariffs applied for anti-free market reasons, I believe such logic falls apart when tariffs are used moderately and for the proper purpose of countering a pre-existing deformity in true free market choices.

Would such a libertarian condemn me if I advocated that the state sanction his purchase of a stolen stereo? After all, he got the stereo much cheaper than he could from Wal-Mart. It was a "free market" transaction between him and the fence! How about a great deal on gold fillings from Auschiwitz!

It is ironic that those who are so intent on their personally liberty take umbrage at the idea that someone should advocate sanctions against profiting from plantation labor.

Free trade is for free people. Unfree societies simply can't hold up their end of the bargain. Its also a matter of economic security. At some point, the slaves will revolt. Society built on force and injustice will collapse. Woe be to us if we are vitally connected to such an economy when that happens.

Bastiat and the others could not see this from where they stood. They are great minds, but were not in a position to consider a complicated, interconnected modern economy. Even in the early 1900's trade amounted to about 4% of our GDP. With those numbers, yes if China wanted to subsidize tea production then it amounts to a gift to American consumers. And if the distortion blows up on them we just get tea ... But this scenario does not bear scrutiny when half the parts in all our products come from such an economy. When THAT economy blows up, we go down too.

It is a complex subject, and there has been so much misinformation put out on it that I can understand how it would be hard to follow. My position is impossible to pigeon-hole in left-right context people are used to.

If you care to afford me another chance, perhaps listening to it on audio (with amplifying remarks) would produce the necessary paradigm shift. Check out the net radio show tonight, look a couple of posts above this one for the link.

Who defines how free you have to be to be considered "free market" or have "free trade"?

If the people of China didn't want a communist government then they would overthrow it. It sounds like you are saying that because China does not meet your personal requirements for freedom we should make ourselves less free. We could just deregulate our own industry and then maybe we could compete.

The only truly "free market" would be some kind of anarcho-capitalism or something.

"If the people of China didn't want a communist government then they would overthrow it. "

That is easier for you to say from the comfort of your chair than it is for them to do. As I recall, when they tried it at Tienamen Square they were run over by tanks. And thanks to guys like you, who want to reward their ruling class for their anti-free trade distortions in the market, that ruling class will be able to afford plenty more tanks to run over their peasants with.

It sounds like you are saying that because China does not meet your personal requirements for freedom we should make ourselves less free.

They are not "my personal requirements" for freedom, they are just the requirements for freedom. The average Chinese citizen is not at liberty to leave the country to pursue better economic opportunities elsewhere. They have a hostage labor force. If they can't leave, they are not free. If they don't have a free media who will give them the ability to make informed choices, they are not free.

In addition, they don't have a justice system that will protect their rights, including their right to control the property they have even if some giant corporation wants it, or even compensation if their employer negligently and willfully acts in a way that destroys their health.

As for the claim the policy I advocate would "make us less free", the logical outcome of that thinking is to make enslaving people pay! And if enslaving people pays, there will (by the iron law of supply and demand) be more of it. Maybe one day even you will be the slave. Perhaps then the hard lesson will be learned that God designed the order of the world so that freedom exercised without regard to virtue or justice is soon lost.

How about a great deal on gold fillings from Auschiwitz? There are all sorts of manners by which one can profit from those willing to deny liberty to others. But treating with such brutes, allowing them to profit from their brutality and denial of liberty to others, is what makes us all less free. It is not sanctioning them that makes us less free, but partnering with them.

The hyper-selfish view that "if I can save a few bucks by buying my cotton from the slave plantation then that is only my business" is ultimately a loser for a free society. Giving that kind of freedom puts the unscrupulous at an advantage over the honorable.

Such "freedom" to deal with oppressors of freedom is, in the long run, self-defeating. It is profiting by feeding the alligator of oppression in the hopes that it eats you last!

Yes, those are your personal requirements for freedom. Where did God say you have to have mass media and open borders or whatever to be free?

The right to leave relies on other countries willing to take people. We all know there is no right to enter a country and that means there is no inherent right to leave one.

You seem to have a problem with China's restrictive economic polices and supposedly unfair use of imminent domain all the while the US uses imminent domain on behalf of corporations and has some restrictive economic policies of it's own. America needs to fix it's own anti-freedom problems before it tries to fix everybody else.